If you operate a website which does business with consumers based in the European Union, read on.

In the recent case, Verein für Konsumenteninformation v Amazon EU Sàrl (28 July 2016), brought by Austrian consumer protection body Verein für Konsumenteninformation (VKI), the Court of Justice of the European Union (ECJ) held that Amazon’s standard terms of business were unfair under the Unfair Terms in Consumer Contracts Directive. As such, an injunction was granted forcing Amazon to change its standard terms.

The facts of the case were straightforward.

In Europe, Amazon’s online businesses are based in Luxembourg and conducted by Amazon EU SARL (Amazon EU). Online sales are made with consumers across the EU, via websites addressed at consumers in the different member states, such as France (www.amazon.fr), Germany (www.amazon.de) and the UK (www.amazon.co.uk). In every case, the conditions of sale provide that the contracts made by consumers via these Amazon websites are with Amazon EU and include a choice of law clause stating that Luxembourg law applies.

Whilst there is no specific Austrian website, Austrian consumers buy from Amazon EU over the amazon.de website. Amazon has no registered office or establishment in Austria. Council Directive 2009/22/EC on injunctions for the protection of consumers’ interests gives qualified entities such as consumer protection organisations the right to obtain orders prohibiting infringements of consumer protection measures, including under the Unfair Consumer Terms Directive. Accordingly, VKI sought an injunction in the Austrian courts against Amazon EU, prohibiting the use of the Amazon terms on the basis that they were contrary to legal prohibitions or accepted principles of morality and that they breached the Unfair Consumer Terms Directive.

Eventually, the case was appealed to the Austrian Supreme Court, which in turn referred various questions to the ECJ for a preliminary ruling, one of which related to the choice of law clause. The ECJ held that the standard term choosing the supplier’s law (i.e. Luxembourg law) as governing law was unfair for consumers because it gave the consumer the impression that only that law applied, whereas under EU law the consumer also enjoys the protection of the mandatory provisions of law that are applicable in his or her home state.

Next steps?

Companies trading cross-border with EU consumers on terms which do not apply the local law of the consumer should consider updating their standard choice of law clauses. In light of this recent case, these clauses should explain to consumers, using plain and intelligible language, that they are always entitled to any mandatory consumer protections applicable in the country where they live.